For his "Off the Charts" segment of Tuesday's episode of Mad Money (the 12th anniversary of this CNBC show), Jim Cramer talked with Carolyn Boroden, a technician who runs the FibonnacciQueen.com website and also writes for RealMoney.com.
Boroden recently charted Facebook (FB) , Apple (AAPL) and Tesla (TSLA) using some of her favorite metrics. Those tools would have told you to get into Apple in December, Facebook at the beginning of January, and to get out of Tesla last month.
For Cramer, a fundamentalist who prefers to judge stocks based on what's happening at the companies and in the economy, technical analysis is still a useful tool. He likes it especially in times of confusion such as now, when markets have run far ahead, and as the Fed is preparing to raise interest rates.
Boroden likes to look at crossovers, when shorter-term moving averages move above or below longer-term averages, signaling buying or selling opportunities.
Specifically, she likes to watch the 5-day and 13-day exponential moving averages, which give extra weight to the most recent price action. The technique isn't perfect, but Boroden argues it can keep you on the right side of the market.
In one example, Boroden looked at Facebook, a stock which has been on fire since early January. On Jan. 5, the 5-day exponential moving average for Facebook moved above the 13-day, signaling the stock was in buy mode. It's remained there ever since.
Similarly, Apple's 5-day exponential moving average crossed above its 13-day in early December, coinciding nicely with the start of a surge which is still going on. Boroden is careful to use other measure to backstop her analyses, such as Fibonacci support levels.
In the third example, Boroden looked at shares of Tesla, which entered a bullish run in December when the stock was trading in the low $190s. Shares rose as high as $287 by mid-February before the 5-day exponential average went under the 13-day signaling a sell. That would have gotten you out in the $270s, well above $30 ago, suggesting the potential of following the charts.
With the Fed about to start raising rates, and the potential for increased market turmoil, technical charting like Boroden's can offer traders a touchstone to keep their profits and make new ones, Cramer said, even as he noted that by Boroden's measures, the S&P 500 remains in buy mode.
Meanwhile, on Real Money, Cramer says there's not a lot that would make Valeant (VRX) particularly attractive. Check out his pithy analysis with a free trial subscription to Real Money.
To read a full recap of this episode of "Mad Money," click here.